Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
I am an intraday price action discretionary futures trader.
From your experience, To be a consistent future day trading does Rewards always have to be greater than Risk per trade? Often I read or hear trading content where it states always keep R:R above 1 or 2 per trade.
I am asking because I am currently testing and reviewing a strategy where I can get 10 ticks frequently, but my stop loss will vary (15-30 ticks) depending on market structure at the moment.
Thank you and I appreciate your time and effort.
Can you help answer these questions from other members on NexusFi?
I don't trade like you at all (I am algo trading), but I don't think the rewards must be above the risk in order to be successful.
What is really important is the expectancy, not the risk/reward.
Of course, there are psychological reasons why you might want risk/reward a certain way, but the key is if the math works out.
I have algo strats that win over 90% of time. but reward/risk is awful (little rewards, big risk). Overall strategy is profitable (positive expectancy), so I trade it.
I have algo strats that win over 20% of time. but reward/risk is great (big rewards, little risk). Overall strategy is profitable (positive expectancy), so I trade it.
Expectancy is the key.
I can't some helpful links here, since it might be considered self promotion...
I trade ES/RTY/CL/GC/6E and almost all my trades have a negative R:R , the markets whip around so much that you need to room. I am by no means the best or richest trader but I do trade full time so I think it works at least for me.
and the more and more I trade I realize that setting a fixed TP isn't always the best way to trade.
my 0.02
-P
"Truth is not what you want it to be; it is what it is, and you must bend to its power or live a lie"-Miyamoto Musashi
As a manual trader though, high risk ratio will require you to be right more times out of set number of trades.
See it like this, 2:1 risk:reward will require you to be right at least 30% times more as you were when you were doing okay with 1:2 risk:reward. This is just roughly I'm saying, so you need to really define what you mean by "frequently", answer to your question will be there. There will be more astute math guys replying here sooner or later to get you right number, but this is just to give you picture of it.
By the way, there is nothing wrong with it, its just that manual traders are rarely right enough times to achieve it successful. So as a thumb rule I wouldn't say lower than 1:1 would be a good idea unless that "frequently" is in good frequency.
So its all about the positive expectancy over a series of trades. That is a good way and logical way to think of it.
I am happy to know you have algo strats that win over 90% of time, because I am currently testing a strategy similar with little rewards, and big risk, however, the strategy kinda fits my comfort area and time commitment versus another strat that requires a bit more trade management and time.
Another question please.
How many number trades would you recommend to confirm positive expectancy of strategy? I am currently thinking 1 year worth or 300 trades because the strategy seeks a trade per day. How many did you use for your 90% win strategy?
I too trade ES and CL daily and I certainly agree with you regarding the wavy price action challenge on a day-to-day basis. Having a large logical (based on price action at the time) stop loss helps me mentally and strategically because I do not like getting false stop outs due to bad stop location.
Regarding fixed profit target. Yes, setting a fixed profit target versus profit target based on logical support and resistance area, to me, is an ongoing challenge. I kinda favors a personal comfortable decision or technical decision. I do not have an answer for it now. I tend to seek both ways.
5-10 years of backtesting can sure prove a strategy reliable. I am not sure I can manual backtest intraday trades for 5 -10 years. That would take alot of time.
For sure, I understand your reasoning for testing different market situations. Good idea.